Placing the customer at the center of the lending model through a data-driven approach
Historically, consumer lending has been an in-person experience that revolved around relationships, but with the pandemic accelerating the use of digital channels, and with customers progressively making lending choices based on their digital experiences, innovative lenders are tailoring products to fit their customer needs by using data to personalize that experience. FIs that use data to anticipate and offer the right products, services and experiences to their customers at the right time can create positive customer experiences, which can encourage loyalty, build trust and advance additional banking needs across the spectrum.
To derive meaningful insights from customer data and deliver real-time offers and services, lenders need to understand the customer from every angle — by aggregating customer data through continuous event streams of transactions and interactions — and home in on signals and life events. While adhering to regulatory and consumer privacy requirements, FIs that break down data and business function silos and work toward establishing a shared customer data repository that is continually enriched can increase transparency and accountability throughout the enterprise. And with every employee on the same page with access to customer data, FIs can shift from offering one-off, compartmentalized lending transactions to offering collective experiences across P&Ls, tailored for each customer.
Gaining and using meaningful insights from customer data
An example of gaining meaningful insights from data and delivering real-time services to customers would be a hotel guest who has stayed at a different property within the same hotel brand. Their desired room type, floor, meal preferences, wake-up times, laundry needs, etc., and any customer reviews on social media from past stays can be stored and made available to the current hotel so that the property can leverage these insights to enhance the guest’s stay. And after the stay, the data is enriched further with any new insights gained.
Leverage technology to deliver hyper-personalized customer experiences
With a recent EY survey reporting that consumers expect FIs to offer truly customized experiences across channels, products and lines of business, delivering differentiated and hyper-personalized customer experiences requires more than just digitizing and customizing front-end processes. It requires leveraging technology to transform front-, middle- and back-office processes to deliver consistent, streamlined customer engagement through an omnichannel experience, regardless of entry point, across the entire lending lifecycle, as well as driving efficiency and cost optimization throughout the lending process itself.
For example, a few large FIs are working to seamlessly integrate the personal touch of legacy banking with innovative technologies to provide an integrated digital experience for their customers across all lending asset classes (mortgage, unsecured, auto, student, etc.). They’re using advanced analytics and trusted digital assistants (through artificial intelligence) to give customers greater access and information to manage their cash flow, balances and transactions or to pay bills while striving to provide little to no differentiation between in-person, web-based or the mobile app customer experience.
Other FIs are leveraging technology to drive efficiency throughout the lending process. For example, FIs can automate and streamline data collection wherever possible by obtaining asset, employment and collateral data through trusted application programming interfaces (APIs), eliminating the need to collect it from the borrower. Subsequently, the FIs can validate both data and processing documentation, reducing fraud and operational risk, while enabling them to make more accurate credit decisions and deliver these decisions faster — nearly instantaneous for card and auto products, with significantly reduced cycle times for mortgage and home equity loans.
Integration with ecosystem partners
The third principle involves integrating ecosystem partners across the lending lifecycle and adjacent services supporting the borrower’s homebuying journey to curate personalized service bundles and provide holistic value to the customer beyond singular transactions. Embracing this principle enables earlier and more effective engagement with the customer to potentially help them save and shop for a lending need before they are drawn to competitors and ensures connectivity with the customer long after the initial transaction is completed.
Our research indicates that consumers’ value propositions are built around life events. Home buying is a high-volume, high-value life event that offers lenders the opportunity to proactively address the next set of customer needs with lending solutions and product or service bundles, giving them the ability to capture their customer’s total addressable wallet as well as promote stickiness, increase brand loyalty and build trust. Brands that are able to drive trust through a seamless and holistic experience and curate products based on needs can differentiate and win in the home-buying market.
Different approaches to consumer lending
The three core principles are being incorporated, to varying degrees, throughout different consumer lending models. And although some consumer lending approaches may be more effective than others, it’s important to note that one size doesn’t fit all when transforming your FI’s lending model to meet your current challenges. Consumer lending can be viewed on a broad spectrum, reflecting changing customer needs and FI capabilities, with lending models ranging from providing simple transactional loans to delivering omnichannel holistic customer experiences. Let us now explore three approaches to consumer lending transformation.